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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
During the past 13 years, the highest Beneish M-Score of Vonage Holdings Corp was 0.99. The lowest was -5.31. And the median was -3.01.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Vonage Holdings Corp for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 0.8735||+||0.528 * 0.9679||+||0.404 * 1.1156||+||0.892 * 1.0481||+||0.115 * 0.8027|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.026||+||4.679 * -0.107||-||0.327 * 1.0363|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $18.0 Mil.|
Revenue was 214.601 + 214.737 + 218.882 + 220.733 = $869.0 Mil.
Gross Profit was 128.959 + 155.702 + 157.047 + 158.377 = $600.1 Mil.
Total Current Assets was $115.4 Mil.
Total Assets was $675.3 Mil.
Property, Plant and Equipment(Net PPE) was $49.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $51.4 Mil.
Selling, General & Admin. Expense(SGA) was $500.9 Mil.
Total Current Liabilities was $185.7 Mil.
Long-Term Debt was $143.8 Mil.
Net Income was 5.604 + 4.556 + 5.518 + 4.588 = $20.3 Mil.
Non Operating Income was -0.01 + -0.002 + 0.036 + -0.013 = $0.0 Mil.
Cash Flow from Operations was 31.309 + 27.764 + 24.082 + 9.387 = $92.5 Mil.
|Accounts Receivable was $19.6 Mil.
Revenue was 211.22 + 203.984 + 204.776 + 209.087 = $829.1 Mil.
Gross Profit was 125.56 + 141.567 + 142.032 + 145.028 = $554.2 Mil.
Total Current Assets was $155.1 Mil.
Total Assets was $642.7 Mil.
Property, Plant and Equipment(Net PPE) was $52.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $36.1 Mil.
Selling, General & Admin. Expense(SGA) was $465.8 Mil.
Total Current Liabilities was $194.1 Mil.
Long-Term Debt was $108.5 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(17.99 / 868.953)||/||(19.649 / 829.067)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(155.702 / 829.067)||/||(128.959 / 868.953)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (115.398 + 49.63) / 675.302)||/||(1 - (155.14 + 52.243) / 642.749)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(36.066 / (36.066 + 52.243))||/||(51.407 / (51.407 + 49.63))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(500.871 / 868.953)||/||(465.772 / 829.067)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((143.836 + 185.695) / 675.302)||/||((108.534 + 194.115) / 642.749)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(20.266 - 0.011||-||92.542)||/||675.302|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
Vonage Holdings Corp has a M-score of -3.06 suggests that the company will not be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
Vonage Holdings Corp Annual Data
Vonage Holdings Corp Quarterly Data